Exchange Rates Today - Weak Chinese And German Data Sets Keep Euro Weak And Send GBP USD Lower

Modified: Tuesday, 28 August 2012 08:48 BST - Written by John Cameron

STORY LINK Exchange Rates Today - Weak Chinese And German Data Sets Keep Euro Weak And Send GBP USD Lower

Yesterday’s session in the currency markets marked the final public holiday in the UK until the Christmas shutdown, meaning that there was little in the way of price action for Sterling-based pairs. However, it was a case of ‘business as usual’ for the world’s other major currencies, with some significant data releases triggering market movements.

Perhaps the most notable release came in the Far East during yesterday’s Asian session, with the latest edition of China’s Industrial Profits data. The annualised figure for July showed a 2.7% contraction from June’s number. It was the fourth month in succession that China’s industrial base’s combined profit had contracted, heightening concerns that the giant Asian economy is heading for a crash landing. The country’s policymakers had taken affirmative action to cool levels of economic growth in the latter part of last year and Q1 of this year, in an attempt to control spiralling domestic price inflation. However, with China’s export markets continuing to contract in the intervening period, it increasingly appears that the country’s leaders have gone too far in tightening monetary policy. The effects could serve to prolong the global economic winter which indicators suggest is fast approaching.

The air of gloom in the market was added to by the German Ifo Business Confidence survey for August, also released yesterday, which showed that sentiment amongst business leaders in the eurozone’s leading economic power had sunk to its lowest level since the Spring of 2010. The German business sector is becoming nervous about the country’s ability to whether the ongoing European debt crisis and its starting to have a negative multiplier effect on Germany and the region at large.

In the shakedown following yesterday’s figures, the safe haven US Dollar was the main beneficiary, sending the GBP USD exchange rate down into the 1.57s once more following last week’s brief excursion above the 1.5900 level. Meanwhile, the euro’s improvement of last week stalled, leaving the GBP EUR exchange rate mired in the mid-1.2600s.

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